Publication detail

Optimal Deterministic Debt Contracts

Author(s): prof. Ing. Karel Janda M.A., Dr., Ph.D.,
Type: IES Working Papers
Year: 2006
Number: 25
ISSN / ISBN:
Published in: IES WP 2006/25
Publishing place: Prague
Keywords: Costly State Verification, Multiple Lenders, Debt
JEL codes: C72, D82, G33
Suggested Citation: Janda, K., (2006). “ Optimal Deterministic Debt Contracts ” IES Working Paper 25/2006, IES FSV. Charles University
Grants: IES Research Framework Institutional task (2005-2011) Integration of the Czech economy into European union and its development
Abstract: This paper extends the costly enforcement model of optimal financing to the case of investment projects financed by several lenders. We consider the asymmetric situation when only one lender is a big strategic investor. All other lender are small passive investors. We first provide the sufficient and necessary condition for renegotiation proofness. Then we show that the optimal verification is deterministic. We also discuss the conditions under which the optimal contract is a debt contract.
Downloadable: WP 2006_25_Janda

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